Comparative Analysis of Agricultural Labour

Productivity and the Associated Changes in the

Sector of Production in Relation to Development
Issues from 2000 to 2010 in Four Countries

Introduction
In 21st Century, labour market has become more competitive in
every sector of production. Along with the rise of technology that
has played important role in so many aspects such as economic
activities, employers preferably look for competent labour that are
skilled and well trained one. Not only in mining and manufacturing,
but also in agriculture sector, nowadays labours are forced to be
able to work with the technological advances. Besides the
technological assets, some of the important inputs are
transportation (for the distribution) and environmental needs (water,
fertilizers, fertile lands).
Good inputs are essentially needed in the stage of production.
However, the better figure if there are more output with the less
input. Neoclassical economist, Ricardo, proves this: innovation
allowed a single worker to produce more output per unit of time,
which led to an increase in wages and living standards.1
That is one of the illustrations if the labour productivity increased
together with technological intervention. However, when there is a
reduction in labour productivity along with the rise of unit labour
1

(Saint-Paul, G. 2008: viii)

cost, it is going to be a problem as since there are only little profits.

Indeed, there might be a shortcoming for the profits but it does not
always trouble the economy. Taking a comment from CNBCs
discussion on Productivity, Jobless Claims & Unit Labour Costs, a
guest provides a very good comment that could enlighten my point.
She argues that the notion of lower labour productivity in
accordance with the increase of wages is not necessarily bad for the
economy. It depends how it is distributed. When there is lack of
inflation, it is translating into higher salaries and higher purchasing
power for people, which is not necessarily bad.2
In accordance with that, not only technology, but also some
factors could increase labour productivity. Welfare services and
employee welfare could determine the labour productivity. To gain
labour productivity, it is essential to employers to equip their
labours not only with machineries and new technologies, but also by
services for example insurances, additional wages for overtime
working hours, and compensation. Thus, the labours will be highly
motivated and it might increase the labour productivity.
In this essay I am going to analyse the labour productivity in
agriculture sector in four chosen countries: India, Indonesia,
Philippines, and Thailand. This essay is constructed into two
sections. The first section is about an explanation of labour
productivity and its calculation along with further data analysis from
four examined countries from 2000 to 2010 period. Section two is
2

CNBC on Productivity, Jobless Claims, and Unit Labour Costs

about the discussion whether welfare could boost labour

productivity or not, or the other way around.

1. Labour Productivity
There are some aims in measuring productivity. Quoting from
OECD report, five objectives of productivity measurement include
technology, efficiency, real cost savings, benchmarking production
processes, and living standards.

Talking about the labour

productivity in agriculture, it is interesting to look at the role of

technology in productivity, whether it helps increasing the
production stage or not.
Secondly, efficiency is another point of view to be observed. Full
efficiency is defined where a production process has achieved the
maximum amount of output that is physically achievable with
current technology, and given a fixed amount of inputs (Diewert and
Lawrence, 1999).4 I rise up two divisions from efficiency itself. Those
are labour efficiency and technological (machineries) efficiency. The
difference between both of them is by maximizing or eliminating the
workers in labour efficiency and machineries in technological one.
3

(Measuring Productivity: measurement of aggregate and industry-level

productivity growth in OECD Manual. 2001. Page 11-12)
4
(ibid. page 11)
3

Looking at the living standards could be placed as the third

interesting point. Productivity is the key indicator of long-run living
standards. For emerging countries, creating productive jobs for a
growing labour force is paramount in the struggle to eradicate
poverty and improve living standards.5 However, there is an
obstacle behind a growing labour force. It is impossible to put all of
the total population to be fitted as labour. There have always been
minimum ages and educational standards in order to apply for a job.
Furthermore, the idea of lowering poverty does not necessarily
translate the decrease of unemployment rate. Another thought has
been stressed. Apparently, some of the economists do not quite
satisfied when there is a fall in unemployment rate. The reason
behind this issue is due to how it is calculated. Taking from
Bloomberg Business Week, it is explained that:
The unemployment is calculated by adding up all the people who
tell the government surveyors that they cannot find work and
dividing it by all the people in the labour force-those either
employed or actively looking.6
Thus, if people stop looking for a job, they are no longer counting
as unemployed. As a consequence, there is a drop in the
unemployment rate.
Based on OECD manual statistics report, there are two kinds of
output for the measurement variables; those are gross output and
5

(Sparreboom, T, et. al. in Monitoring MDG Employment Indicators.2011

International Labour Organisation paper.page 14)
6
Coy, P. 2011. The Unemployment Rate Drops, but Economists Arent Smiling in
Global Economics. Bloomberg Business Week, December 12, 2011
4

value added.

In terms of productivity itself, there are some types of

productivities. It could be labour productivity and capital

productivity, which are single factor productivity measures. Another
one is the combination between multiple factor productivity (MFP),
so-called capital-labour productivity.
The simplest model is labour productivity because it is readable
and could be simply measured. According to the OECD glossary
statistical terms, labour productivity is defined as output per unit of
labour input.

Moreover, labour inputs are variable. Labour

productivity could be counted by using total number of hours

worked in employment or total employment in persons as labour
input variants.9
Another OECD report leads me to the point that the choice of
labour inputs could make some changes in the final calculation of
labour productivity. The report suggests that by using the total
number of working hours as since it is more accurate. Nowadays the
pattern of working is not necessarily only full time works. Some
people do part time job, which is one of the reason why a simple
headcount of employed persons can hide changes in average hours
worked.10 However, because of the limit of the data, I am using the

(Measuring Productivity: measurement of aggregate and industry-level

productivity growth in OECD Manual. 2001. Page 13)
8
OECD Glossary Statistical Terms
9
(Freeman, R, in OECD Statistics Directorate, Division of Structural Economic
Statistics. Page 15)
10
(Freeman, R, in OECD Statistics Directorate, Division of Structural Economic
Statistics. Page 5)

alternative for this essay, which is total number of employment as

my calculations variable.
The data that I am going to use for my analysis are including
every sector growth of output and employment share (in order to
know the comparison between one to other sectors). Secondly are
GDP output constant prices for agricultural products, total number of
employment, and exchange rate for the purpose of assessing labour
productivity itself. The third part is household final consumption
expenditure, inflation rate, health expenditure, education enrolment
on tertiary level, and workers' remittances and compensation of
employees, in order to know the employment and welfare
improvement. In order to simplify, the third part is being provided in
the section 2.
a. India

1. Growth of Output (%) in India

Overall, the agriculture output is fluctuated significantly for the
whole 10 years. From the chart, it could be seen that agriculture
growth output is the lowest growth, compared to the industry and
6

services output growth. Even if it is compared to GDP growth,

agriculture output growth is still below GDP line in total except in
year 2001 and 2003.
The least percentage of agriculture production leads to a
question: Does the small scale of agriculture output define the
lowest number of agriculture labours? Now it is important to have a
look at the employment data for further analysis.
Year
Series
Agriculture (% of total employment)
Industry (% of total employment)
Services (% of total employment)

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

59.8
16.1
24.1

..
..
..

..
..
..

..
..
..

..
..
..

55.8
19
25.2

..
..
..

..
..
..

..
..
..

..
..
..

..
..
..

6. Employment Share (% of total employment) in India

Due to the incomplete data for whole years, however, it could be
seen from year 2000 and 2005 that surprisingly people who work in
agriculture sector are at the top of the ratio for whole population.
However, looking back at the growth output the number of
agriculture production and the number of agriculture labours are
inversely comparable.
It has to be remembered from previous discussion that the input
does not only come from labour. Generally, the use of technology
has been introduced in 21st Century especially for the production
stage. It is arguable that the role technology as input is more being
used in industry and services sectors. Another argument is that the
other inputs such as capital and investment are more allocated to
industry and services than agriculture. As a consequence, the

growth of agriculture is slower because agriculture has labours but it

has lack of investment and capital.
How about labour productivity? Does labour productivity of
agriculture is at the lowest point as in the output growth? Next chart
explains about labour productivity in agriculture, mining, and
manufacturing in India.

3. Labour Productivity (by total number of employment) in India 11

Based on the chart, surprisingly, it could be seen that the labour
productivity in agriculture is on the top of mining and
manufacturing. Again, there is limit for the data from 2006 to 2010.
However, it is still comprehensible that there are slightly growth of
the labour productivity in three sectors from 2000 to 2005.
The chart translates that apparently, the number of agriculture
labour productivity are in contrast with the output growth ratio. I
might argue that the lowest of growth output rate might be due to
11

GDP is constant price in billion Rupees and number of employment in thousand.

lack of investment. Adopting from FAO Corporate Document

Repository, taken from World Food Summit, irrigation and efficient
water use

12

could be an appropriate example on investment.

Moreover, a case study proven this argument, proclaiming that

Agriculture, horticulture, and animal husbandry are the
predominant economic activities in the taluk. They are not well
developed due to the shortage of water.13

b. Indonesia

4. Growth of Output (%) in Indonesia

Generally, it could be seen that the illustration of Indonesia
growth output is slightly different with India growth output. In
Indonesia, there is only small change for a decade. The breathtaking
level is in 2001 and 2008, when the industry, services, as well as
GDP decrease, however the agriculture output growth is rising up.
Looking back in 2008, there was a global crisis. However, the
12

In the section of Investing in Food Security

Kumar, C. A, et. al. A case study of India: Water and Population Dynamics in a
Rural Area of Tumkur District, Karnataka State.
13

agriculture output growth in Indonesia was expanding with the

highest rate of output growth for a whole 10 years.

5. Employment Share (% of total employment) in Indonesia

From the graph, we could see that the figure of Indonesia is quite
similar to India. Agriculture output growth is the lowest whereas in
employment share, it comes to the highest percentage. Does the
labour productivity determine the lowest point in agriculture output
growth?

10

6. Labour Productivity (by total number of employment) in

Indonesia14
Apparently, the labour productivity in agriculture is at the lowest
point as same as the proportion in the output growth rate. It might
be indicated that labour productivity has affected the growth output
of agriculture in Indonesia.
Together with the modest agriculture labour productivity, arguably
lack of assets and investment might be considered as the
determining factors of the lowest agriculture output growth rate. A
specific form of Cobb-Douglas production function introduced by
Boopen leads to this argument, which is genuinely the output is the
sum of total factor productivity, total physical capital of a country,
transportation capital, labour, and error term.15
In addition to that premise, other example of the investment is in
a form of transportation to support the flow of distribution. In order
to gain more output, more additional transportation capital should
be considered as one of essential input due to its archipelagic
nature.16
c. Philippines

14

GDP is constant price in trillion Rupiahs and number of employment in

thousand.
15
(Boopen, S. in The Empirical Economics Letters, Vol. 5, No. 1, 2006. Page 41)
16
Indonesia: Market Development and Access Strategy 2011/2012 in Department
of Primary Industries.

11

7. Growth of Output (%) in Philippines

In Philippines, the output growth trend fluctuates significantly for
a decade. As in India and Indonesia, agriculture output growth is in
the minimum level compared to industry and services. The
interesting point comes from industry, services and GDP that there
are sharp changes from 2009 to 2010 whereas there is only slightly
growth in agriculture output. The second fascinating fact is in 2001
where agriculture output rate is little bit higher than GDP and
industry output, which have notable bigger rates for the rest of
examined years.

12

8. Employment Share (% of total employment) in Philippines

Employment share composition is quite different compared to the
ones in India and Indonesia. It is shown mesmerizingly that with the
least percentage of total employment in industry sector, however
the industry output growth is mostly over the agriculture, which
peculiarly has more workers than industry sector. It might be
predicted that the reason why agriculture output is not comparable
with the quantity of labours is because of the little number of labour
productivity.

13

9. Labour Productivity (by total number of employment) in

Philippines17
The chart has successfully determined the forecast that in fact,
the number of labour productivity is quite low in agriculture sector.
However, other factors such as environmental issues has also
contributed to the low output growth. The fact that the Philippines
croplands are presently under severe environmental stress, has
resulted in the severe degradation of the agricultural resource base,
with subsequent problems of accelerated soil erosion, siltation of
irrigation systems, intense flooding, and water pollution.18 It might
be due to few reasons, for example the use of inappropriate and
wrong measurement of inputs (fertilizers), the rampant conversion
of agricultural land into golf courses, residential subdivisions, and
industrial parks or resort .19 I undoubtedly agree with this analysis
because for a decade, everything in service sector is on the top
level both in the output growth and the employment share, as since
there might be more opportunities to get proper income and fixed
jobs.20
d. Thailand

17

GDP is constant price in billion Pesos and number of employment in thousand.

18

(Briones, N. D. in Asian Journal of Agriculture and Development, Vol. 52 No.

1&2. Page 69)
19
Philippines- Agriculture in Encyclopaedia of the Nations.
20
Agricultural job is seasonal job. Therefore, people try to find the fixed job.
14

10. Growth of Output (%) in Thailand

According to the chart, there are some notable fluctuations the
output growth from all of the sectors in Thailand. From industry and
services sectors, mostly the graphs are parallel to GDP trend, except
for services rate in 2003, which is only below 4% whereas the others
are more than 6%.
Furthermore, looking at the agriculture graph, it could be seen
that the peculiar trend, which is not similar to others. Agriculture
output growth is on the minimum level most of the time.
Surprisingly, in 2003 and 2008, agriculture trend climbs more than
GDP rate and it leads other factors rates. Also, the rate of output
growth for agriculture in Thailand in 2003 has successfully been in
the highest ranked from other agriculture rates of other examined
countries by reaching 12.7%.

15

11. Employment Share (% of total employment) in Thailand

The composition of employment share in Thailand is similar to
Indonesia and India where employment in agriculture is in the top
rank, followed by services and industry for a whole 10 years. It
seems that labours in agriculture perform productively. Following
this, the hypothesis is that labour productivity in Thailand is not the
main reason of low output level. It might be due to other factors that
might be similar to India and Indonesia.

16

12. Labour Productivity (by total number of employment) in

Thailand21
The unusual case for Thailand because it indicates that the labour
productivity is very low in agriculture sector. It is somehow similar to
Indonesia that the number of total employment is the highest. On
the other hand, the labour productivity is significantly low. One of
the main reasons of this low growth is that El Nio-induced drought,
which adversely affected production of upland crops in early 21st
Century.

22

Slightly the same problem with Philippines that is due to

environmental matters. In responding to this issue, there should be

some alternatives in order to preserve the stability of agricultural
output growth. Nowadays, there are more choices and options
provided by technology. For instance, by using specific equipment, it
is possible to grow plants without soil, so called hydroponics. The
options are there however it is possible to have skilled labours and
21

GDP is constant price in billion Baht and number of employment in thousand.

Poapongsakorn, N. in the section of Part 2: The decline and recovery of Thai
agriculture: causes, responses, prospects and challenges
22

17

expertise that could be able to operate those particular

technologies.
e. Labour Productivity and Its Relation to Employment and
Welfare Improvement

13. Labour Productivity (with exchange rate conversion)23

After being converted to the same units, it could be seen that
agricultural labour productivity in India is in the highest rank,
followed by Philippines, then thirdly Indonesia and Thailand at the
same level. Does these trends automatically identify employment
and welfare improvement in each country? Do the better welfare
services actually improve labour productivity?
There are few definitions of welfare itself. In connection with this
analysis, I am quoting from an online dictionary that defines welfare
as availability of resources and presence of conditions required for
reasonably comfortable, healthy, and secure living.

24

Household Final Consumption Expenditure (agriculture household)

23
24

Exchange Rates (Units: National Currency per SDR)

From online business dictionary

18

Year
Country
India
Indonesia
Philippines
Thailand

Year
Country
India
Indonesia
Philippines
Thailand

2000

2001

2002

2003

2004

124213.1339
1181.340051
2131.800933
2430.493985

1208.812537
2087.675995
2423.67787

1237.620376
2129.152471
2482.700842

1270.889363
2202.643604
2605.230054

1326.215931
2263.211561
2654.479977

2005

2006

2007

2008

2009

146347.7262
1371.376225
2295.184744
2799.376953

1391.233804
2358.568119
2742.64273

1405.144837
2425.205176
2738.198096

1441.021437
2477.276419
2794.855198

1414.929114
2524.955351
2699.152547

14. Household Final Consumption Expenditure (agriculture

household)25
Based on the data, it could be seen that India has the largest
buying power than from others. The result of this goes together with
the labour productivity. It might be predicted that the agricultural
labour costs in India is the highest among others too. It might be
predicted if India has low inflation, it is resulted that India has high
wages in agriculture sector.

15. Inflation Rate

25

In constant 2000 US$

19

2010

It might be agreed that agricultural labours in India have high

income from 2000 to 2005 because of the stable inflation. The bad
news is due to heightened inflation rate from 2005 onwards.
Indeed, India performs well during the first half decade. However,
in this case, Thailand has better achievement because the labour
productivity is categorized as the lowest, however from the
consumption expenditure point of view, every agricultural household
has high buying powers. It is proven as well by the low rate of
inflation from 2000 to 2010.
I might put Philippines at the third place. The argument is that it
has quite the same purchasing power, but the inflation rate is
approximately 50% higher than Thailand. So the wages is definitely
lower than Thailand and India.
At last, Indonesia has substandard performance in agriculture
sector. It seems that the labours in agriculture sector has not
achieved the welfare level. It is caused by labours buying power
that is not properly adjusted with inflation rate. Following this, the
number of labour consumption expenditure is low whereas the
inflation is quite high. Consequently, it conducts to the illustration
that the wages in agriculture sector is quite small.
In addition to the labour welfare measurement, quoting from
Reddy, it is mentioned that the welfare measures like cheap food in
canteens, free medical and educational facilities etc. Indirectly
increase the real income of the workers. Hence they try to avoid
industrial disputes, as far as possible and do not go on strikes on

20

flimsy grounds.26 Sticking to that argument, the data for health

expenditure is also needed in terms of one of the indicators for
employment welfare.

16. Health Expenditure total (% of GDP)

From this chart, I still stick to previous rank that labour welfares in
India and Thailand are higher than in Indonesia and Philippines. This
data quite gives substance to Reddys statement about welfare.
Government health expenditure could be one of labour productivity
stimulators. The way it is explained is that when there are more
public health services, the cost of health service might be cheaper.
That is proven as well by the inflation rate. Inflation itself indicates
the increase in the general level of prices.27 So if it is looked from
health services point of view, India might be grouped as country

26
27

(Reddy, R. J. 2004: 6)
(Bannock, G. et. al. 1998: 205)

21

that has good employment welfare, proven that the highest of

labour productivity in India resulted this argument.
Secondly, Thailand could be put in one group with India. The
reason is that the health expenditure, spent by government comes
the second rank after India. And the inflation rates are quite low for
a decade. Unfortunately the number of labour productivity is
contrary to this assumption because it remains low.
Meanwhile, Indonesia and Philippines are at the second group. In
this case, Philippines are an interesting country because it has
different employment share composition where there are more
workers in service sector than in agriculture and industry.
There might be case that income for other sectors (mining,
manufacturing, industry, and services) are higher than agriculture
sector in Philippines due to intelligence rate. For more explanation is
on the graph below.

17. Education Enrolment for tertiary level (%)

With the minimum information of the data set that is only
available from 2000 to 2003, yet still it could be seen the
22

progression of education enrolment. In Philippines, educated labours

might prefer services and industry sectors as their job field because
they have skill and knowledge. Looking at the employment welfare,
agriculture labours in Philippines might not be under welfare rate.
Indeed the buying power is quite small but the service expenditure
by government is somehow subsidized well.
Intelligence as one of the labour welfare does not always indicate
the labour productivity. Relating to this, it is such a peculiar case for
Thailand because more people have higher education, but the
labour productivity is low. However it does not result the bad output.
I am quite sure that the other inputs help the agriculture production.
Thus the performance in growth output level is not too bad.
In order to increase labour productivity, employers should
consider some factors that could increase the motivation of the
labours. This includes wealth prosperity such as income; incentives
for overtime working hours, and compensations. Other aspect like
social welfare needs is importantly considered as well. In addition to
this concrete action, it would be better for the employers to give
some appreciation to the workers by giving some days off and
reward if they could produce more than the expected number of
quantity.
So far, based on the World Bank website, Thailand has upper
middle income whereas others have lower middle income.28

28

World Bank Country Data

23

18. Workers' remittances and compensation of employees (current

US$)
Even though India has the same level of income with Indonesia
and Philippines, however there is a huge number of remittances and
compensation given for the labours. Additional money from
remittances might be as evidence that the labours buying powers
in India is the highest among others. In contrast, Thailand has the
lowest number of compensation, but it does not mean that there is
small employment welfare in Thailand because it is still covered and
balanced by the main income (referring to the World Bank that
Thailand is upper middle-income country).
At the same time, it is not surprising that Philippines has second
large number of workers remittances and compensations. Like
India, even though Philippines is lower middle-income country, yet
by having quite high number of additional money, they could spend
it for education as it is proven that educational rate for tertiary level
is second biggest after Thailand while in Thailand, the number of
24

people who attend tertiary education level is significantly huge. This

is such an evidence of Thailand that has good welfare improvement.
Unfortunately, Indonesia does not really have good income for the
labours, especially to those who work in agriculture sector. Besides
it has small amount of remittances and compensation, Indonesia is
also one of lower middle-income country. Therefore there is only
small total amount of labour incomes. It is proven by the smallest
amount of labours purchasing powers, the high inflation, and the
small number of people who attend tertiary level of education from
2000 to 2010.
Another factor that also important is packed in socialpsychological factor, which is included interpersonal cohesion factor,
conflict factor, psychological climate factor, work satisfaction factor,
reciprocity factor, factor of formal confidence and non-formal leader
of the group, and labour fluctuation factor.29 Also, there is a need of
social control in order to make the labours to know their
responsibilities.30 Moreover it would be better if the social control
exercises very well in combating any corruption form both from
employers and employees whether it is material or non-material
corruption.

Conclusion

29

(Akhmetova, s. et. al. in Bilig, Ahmet Yesevi University Board of Trustees, No.
31. Page 42)
30
ibid.
25

In the light of the above, India performs very well in labour

productivity, followed by Philippines, Thailand, and Indonesia.
Indeed, employment welfare improvement could be the indicator of
high number of labour productivity, for example in India. However, it
does not always work like that if it is glimpsed from Thailand as a
case example where it seems that there is a labour welfare in
Thailand but in contrast labour productivity in Thailand is grouped
as one of the lowest instead of Indonesia.
In fact, there are more other factors that play significant roles in
terms of increasing labour productivity. One of the examples is
training and coaching,

31

in order to have better quality and more

skilled labours. Another good factor is capital deepening32 such as

machineries and traction for agriculture sector in order to be able to
reach the efficiency and allow workers to produce more number of
outputs. Moreover the needs of social control is important for the
purpose of bringing the ideal condition such as a good relation in
between employees and employers, responsibility awareness from
labours, and free from material and non-material corruption.

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31
32

Productivity Growth: Factors that Increase Labour Productivity

ibid.

26

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CNBC on Productivity, Jobless Claims, and Unit Labour Costs.

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